Properties in the lower price ranges are reportedly selling fast and are said to be the main driver of the residential property market currently.
Second or third time buyers and investors are also actively buying lower priced homes.
According to mortgage originator, Betterbond, there is a growing trend among buyers purchasing homes for the second or third time mostly downscaling to smaller homes. These are cheaper to buy and maintain.
Rudi Botha, chief executive officer of Betterbond says of all the bonds granted in 2010, more than half (52 percent) of those were for less than R500 000.
Some 42 percent of bonds granted were between the R250 000 and R500 000 price bracket.
A further 33 percent of bonds granted were in the R500 000 to R1 million and 14 percent were granted for homes priced over R1million.
Botha says first-time buyers are active in the under R600 000 market and they account for 16 percent of the bonds being granted through Betterbond.
“Some of the remaining bonds for less than R500 000 are further advances made to existing homeowners who are tapping into the equity built up in homes that increased in value during the boom years,” says Botha.
Second or third time buyers and investors are also actively buying lower priced homes.
“This ties into growing consumer concerns about rising electricity tariffs, municipal rates, transport and food costs.”
He says this buying in the lower price ranges reflects the desire of many homeowners to reduce their overall debt load including the monthly bond repayments.
Smaller and cheaper homes are also ideal for young and many first-time buyers wanting to expand later, says Jan Davel, managing director of RealNet Group.
He says would-be buyers keen on getting a good foothold in the market will be better off buying a flat or a townhouse in good area now and move into a bigger property when more space is needed.
“Young and inexperienced buyers should rather buy apartments or townhouses in the best area they can afford that is close to work.
"Buyers in this category should focus on paying off their home loans as fast as possible in order to build up equity and value growth in their property."
Davel says for first-time buyers, buying a pre-owned flat or townhouse for up to R600 000, means they will pay neither VAT nor transfer duty and thus save money.
Living close to work saves on transport costs and time spent commuting and more money will then go into paying off the bond faster.
He adds that living in a well-run sectional title complex where owners all pay their levies takes care of the many home maintenance tasks and helps protect the value of the unit.
In Bronkhorstspruit, demand for properties has increased mostly for properties priced for less than R600 000.
RealNet reports this demand is driven by Eskom’s preference to local job seekers at its Kusile power station.
Koos Pretorius of the RealNet Kungwini office says affordable homes in Bronkhorstspruit, Witbank and Delmas are in huge demand. Bronkhorstspruit especially attracts buyers because the town has clean surroundings and excellent air quality.
Townhouses in secure complexes are priced between R450 000 and R600 000. Full-title homes in the R600 and R800 000 are selling faster while there is a slow but steady demand for luxury homes priced up to R3 million.
Pretorius says buyers of luxury homes near Bronkhorstspruit dam include top managers at Kusile and buyers from Johannesburg and Pretoria. These buyers prefer the marina lifestyle and are willing to commute 50km to their city offices for work or business purposes.
He says the high demand for affordable housing has spilled over into the rental market. Smaller units are in short supply, which puts pressure on rentals and creates excellent opportunities for investors.
For example, he says two-bedroom units, which sell for around R320 000, currently achieve rentals of around R4000 a month – a return of 14 percent on investment.
“Two- and three-bedroom rental homes are also in demand. Companies and contractors are active in this sector to provide housing for Kusile staff.”
He adds that property developers are currently scoping opportunities to supply units in the R300 000 to R600 000 range.
“This will increase much-needed stock in the affordable sector, where demand is currently far outstripping supply.” – Denise Mhlanga
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